Regulatory Reporting – What it is and Why Should You Automate Regulatory Reporting

What are the Goals of Regulatory Reporting?

Regulatory reporting is a formal process through which financial institutions submit data and information to regulatory authorities, through which they establish their compliance with statutory and regulatory requirements.

The practice of regulatory reporting helps them maintain transparency and integrity of financial markets by ensuring that institutions comply with standards and practices that promote trust and stability. 

What are the goals of regulatory reporting? The main focus of regulatory reporting is to improve transparency of the financial and operating activities of a company, irrespective of where they operate.

Regulatory reporting also helps in establishing trust between competitors belonging to the same industry. When competing companies adhere to the same regulatory standards, they can be confident that other companies are adhering to the same standards. 

Regulatory reporting serves critical functions within the financial sector that are aimed at ensuring compliance with legal and regulatory requirements. Now that we have reasonably covered what regulatory reporting is, let us move on to the next question –

What is a regulatory report?

A regulatory report is a document prepared by financial institutions and banks by gathering relevant financial and operational data from various internal sources. A comprehensive report can be generated only when the data collection methods adopted are accurate. 

Types of Regulatory Reports

The type of regulatory reports is different across industries, however, there are some common categories of regulatory reports that are used in most industries. 

Financial reports –

Financial statements are essential reports that provide valuable information to regulatory bodies regarding the financial position and overall performance of the organization. Balance sheets, income statements, and cash flow statements are examples of financial reports. 

Risk exposure reports –

This type of reporting is used for identifying potential risks that the company is exposed to. Risk exposure reports are particularly useful in risk management and in general regulatory compliance. The main types of risk exposure reports include operational risk assessments, market risk assessments, and credit risk assessments. 

Transaction reports –

Trade reports, settlement information, and payment records may be categorized as transaction reports. These reports are important for regulatory compliance as they provide detailed information on transactions that require close monitoring to ensure legal compliance. 

Tax reports –

Tax reports are required for Federal, state, and local regulation compliance. These reports must be prepared in accordance with tax laws. Sales tax and income tax reports are usually categorized as tax reports; in some scenarios, withholding tax reports are also included in tax reports. 

Compliance reports –

Regulatory compliance reporting is the most common form of compliance reports. In addition to regulatory reporting, environmental compliance reports, health reports, and safety reports are categorized as compliance reports. 

Need for Regulatory Reporting

Why do you need regulatory reporting? Here is why – 

The cost of non-compliance is nearly 3 times higher than the cost of compliance by implementing compliance and governance frameworks. 

A 2024 statistic reveals that the average cost of implementing compliance measures amounted to $5.47 million, while the cost of non-compliance amounted to $14.82 million. 

A single non-compliance event can amount to costs of up to $5.87 million in revenue. 

Those were some compelling statistics reiterating the importance of having a formal regulatory reporting process. Let us look at why organizations need to have a regulatory reporting processing in place – 

Financial stability –

After the financial crisis in 2008, regulators across the world have increased the emphasis on gathering precise and prompt data from financial institutions. Armed with this information, authorities can identify potential risks and take corrective actions before the financial stability of the organization is compromised. It becomes all the more important to have a regulatory reporting process in place. 

Investor protection –

Timely and transparent reporting ensures that investors can access precise and current information regarding the financial health of the company. The availability of this information helps investors make informed decisions. This level of transparency is vital for establishing trust in financial markets. 

Risk management –

Regulatory reporting is highly effective in identifying and managing risks. Based on the regulatory reports, organizations can assess their risk exposure from credits, markets, and operations and take mitigation measures. 

Legal compliance –

Financial institutions are governed by several laws and regulations. Regulatory reports help them showcase their compliance with these requirements. Non-compliance with the legal compliance obligations can attract penalties and litigations. 

Promoting transparency –

When organizations submit regulatory reports to the authorities, they demonstrate compliance with legal requirements and foster transparency in their operations. Transparency in financial reporting is reassuring to stakeholders, including investors and customers, about operational integrity and adherence to regulations. 

Fraud prevention –

Consistent regulatory reporting can help in detecting fraudulent activities at the initial stages, which protects both the institutions involved and their clients from legal consequences. Regulatory reporting takes a proactive approach in establishing a safer financial environment. 

Improving operational efficiency –

Preparing regulatory reports requires streamlined data collection and management systems. Streamlining of data improves the operational efficiency of the organization, which ultimately saves time and resources. 

Steps in Regulatory Reporting

Regulatory reporting is a must if organizations wish to avoid hefty fines and serious penalties that arise due to non-compliance. How to go about regulatory reporting? The steps below will guide you through the regulatory reporting process. 

1- Understand the regulatory landscape in your industry.

This is the first step to creating an accurate and relevant regulatory report. Companies must first understand the specific regulatory requirements that are applicable to their industry’s vertical and geographic location.

This evaluation must focus on the type of data that needs to be reported, the format in which data is to be reported, and the timelines for submission. A good understanding of these requirements ensures that the regulatory report is accurate and relevant. 

2- Establish data governance –

In order to manage data consistently and to ensure its integrity, you need to have robust data governance policies in place. For establishing governance policies, you need to clearly define data ownership first, then set standards for quality checks on data, and finally establish access controls. Robust governance policies help establish a reliable single source of truth, which is crucial for effective regulatory reporting. 

3- Data collection –

Once governance policies are in place, the next step is to gather relevant financial and operational information from various internal systems. Gathering accounting and compliance software is vital to ensure that all the important details are not missed out. 

4- Data analysis –

Once all the data is in place, it must be analyzed for its accuracy and consistency. In addition to accuracy and consistency, the data must also be relevant to the regulatory framework. Analysis of data helps in identifying trends, potential risks, and compliance gaps, which enables organizations to address issues proactively by way of validation and reconciliation. 

5- Report Creation –

Post data analysis, the compliance or finance team in the organization must compile all the information into a standard report format as per the regulatory norms. To execute this step efficiently, it is best to use regulatory reporting software that streamlines formatting and minimizes errors. Regulatory reports that are created using software are devoid of errors and are in a standardized format, ready for submission. 

6- Report submission –

The completed report should be submitted to the relevant regulatory body within the timelines specified by the regulatory body. Regulatory report filing may be done via digital portals or other specific submission protocols assigned by the regulatory body. It is critical to adhere to the timelines specified by the regulatory body in order to avoid fines or penalties for late submission. 

7- Report review –

Even after the reports are submitted, organizations must continuously monitor compliance and review the submitted reports for revisions and areas of improvement. Continuous monitoring helps spot discrepancies at an early stage and make changes so that the report is as per new regulatory updates or changes in business policies. Ongoing review of regulatory reports fosters a proactive approach to compliance management. 

8 – Continuous improvement –

Organizations must practice continuous monitoring to evaluate their reporting process for enhancing the efficiency and accuracy for future reporting cycles. A culture of continuous improvement helps organizations to align with changing regulations and also optimize workflows and build institutional knowledge within teams. 

Challenges in Manual Reporting

As seen from the above section, regulatory reporting is a lengthy process involving multiple levels of review by stakeholders across finance and compliance departments. Traditionally, this process is carried out manually by dedicated compliance teams or finance teams. Compiling and managing vast amounts of finance and compliance data can be challenging with manual methods. The main challenges of manual regulatory reporting are – 

Data management –

Compliance and regulatory reporting involves managing large volumes of data. The volume of data depends on the geographical location of the company. Companies that rely on manual methods do not have a single source of truth, which makes it difficult to collect, compile, and analyze the data required for compliance reporting. 

Compliance costs –

The constantly evolving regulatory landscape increases the compliance costs for companies. Keeping up with changing regulatory policies requires additional resources who are well versed in regulations and policies, which increases the cost of business operations. Turnover also increases the compliance costs, making it difficult to recruit skilled compliance staff. 

Complexity of regulatory requirements –

As the regulatory landscape continues to grow in complexity, the task of aligning policies with changing regulations gets further complicated. This is a significant challenge faced by compliance teams due to complexities that arise from frequent changes in laws. 

Security concerns –

Data security is the main challenge in regulatory reporting. The vast amounts of data required for regulatory reporting need to be maintained in a safe and secure manner. Companies need to invest in data management platforms that have built-in cyber-security that eliminates security threats. 

Why Do You Need Regulatory Reporting Software?

Given the challenges in regulatory reporting, it becomes important to have a regulatory reporting software that overcomes all the challenges of manual reporting. 

A regulatory reporting software can help organizations overcome the challenges of manual processing. Regulatory reporting software can eliminate the redundancies associated with the manual processing of compliance reports.

Automating the complex aspects of regulatory reporting can improve the accuracy and efficiency of the reporting process. A regulatory reporting software can also support the audit process by creating a clear audit trail for tracking previously submitted reports. 

Regulatory reporting software is helpful because it can handle a wide range of tasks, which include data aggregation, audit trail creation, and validation. How do you choose the right regulatory reporting software? Look for the following must-have features –

• Compliance with regulations – The regulatory reporting tool must support specific regulatory requirements that are relevant to your organization. 

• Data integration – The regulatory software must have the ability to integrate data from various sources seamlessly. 

• Automation – The regulatory software must facilitate automated data collection, validation, and reporting of data without the need for manual intervention. 

• Flexibility and scalability – The regulatory reporting software must provide the ability to adapt to evolving regulations and the ability to handle growing data volumes. 

• User-friendly interface – A user-friendly interface makes it easy for staff to monitor report statuses. The training time is also reduced considerably and efficiency is improved. 

How do you choose regulatory tools? Now that we know the must-have features of the regulatory reporting software, let us look at how organizations must get started with regulatory reporting software. 

Evaluate the needs – Compliance or finance teams must first identify specific regulatory requirements and the type of report required. 

Choose the right tool – The regulatory reporting software must meet the compliance needs of the organization and integrate with existing systems. 

Implement the tool – Once the tool is chosen, you need to set it up and integrate it with specific data sources. This way, the software is configured to generate the required reports. 

Train team members – For successful implementation of the regulatory reporting tool, you need to ensure that the staff knows how to use the tool. 

Monitor and update – You need to regularly update the tool and processes to ensure compliance with new regulations and standards. 

Benefits of Automating Regulatory Reporting 

There are several benefits of regulatory reporting. Businesses stand to gain the following benefits by automating the regulatory reporting workflow – 

Risk management –

Proper reporting helps identify and avoid risks of non-compliance. Efficient risk management ensures the long-term stability of the business and overall success. 

Market confidence –

Compliance with industry regulations and laws helps boost the confidence of the business in staying relevant under market conditions. This improved the overall market stability of the business. 

Improved decision making –

The comprehensive collection and analysis of data for relevant compliance requirements provide valuable insights into market performance. These insights can be used for strategic decision-making. 

More accountability –

Automated regulatory reporting improves accountability by clearly assigning personnel to roles. This ensures that organizations are operating within legal and ethical boundaries. 

Fraud prevention –

Consistent reporting and regulation by automating the reporting process eliminates inconsistencies in the reporting workflow. 

Automated Regulatory Reporting with Cflow

To take advantage of the benefits of automated regulatory reporting, you need a workflow automation platform like Cflow. An AI-powered workflow automation platform like Cflow can help organizations meet regulatory reporting requirements by automating repetitive steps in the workflow. Why is Cflow the right choice for automating the regulatory reporting workflow? 

• Visual workflow builder for creating custom workflows in minutes
• Drag-and-drop form designer for effective capture of data
• Document designer for PDF generation for regulatory reporting
• Conditional logic for request routing for timely review and approval of requests
• API integration capabilities for seamless business operations
• Mobile app for reviews/approvals on the go
• Kanban board functionality for prioritizing tasks

Final Thoughts

As more businesses come under the scanner for their operational procedures, regulatory reporting is becoming more crucial. Companies that do not conform to the regulatory standards are exposing themselves to serious threats and consequences that can cause a permanent dent in their growth and profitability. An AI-powered workflow platform like Cflow can automate the regulatory reporting process by eliminating redundancies. You can explore Cflow by signing up for the free demo right away. 

FAQs

Are regulatory reporting and financial reporting the same?

Regulatory reporting is focused on exhibiting the regulatory compliance of an organization to the regulatory authorities, while financial reporting is focused on the preparation of financial statements that throw light on the financial stability of the organization.

When should you automate the regulatory reporting process?

The best time to automate regulatory reporting is when manual processes are throwing up errors and duplications. 

What happens when organizations do not submit regulatory reports?

Depending on the degree and nature of non-compliance, organizations may face fines, penalties, or in some serious cases even lose their trade licences. 

What should you do next?

Thanks for reading till the end. Here are 3 ways we can help you automate your business:

Do better workflow automation with Cflow

Create workflows with multiple steps, parallel reviewals. auto approvals, public forms, etc. to save time and cost.

Try Cflow for free

Talk to a workflow expert

Get a 30-min. free consultation with our Workflow expert to optimize your daily tasks.

Book a demo

Get smarter with our workflow resources

Explore our workflow automation blogs, ebooks, and other resources to master workflow automation.

Check out our blogs

What would you like to do next?​

Automate your workflows with our Cflow experts.​

Quick Demo

Sign Up

Learn More

Get Your Workflows Automated for Free!

Business Name

Business Email

Phone

Good time to call

Describe your requirements (If any)

By submitting this form, you agree to our terms of service and privacy policy.

Δ